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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
This appeal is filed by assessee against the appellate order passed by the CIT(A) 47 Mumbai [learned CIT (A)] dated 04.05.2022 for A.Y. 2014-15 against appeal of assessee challenging the assessment order passed under section 143(3) of the Income Tax Act, 1961 dated 27.12.2016 wherein disallowance under section 14A read with rule 8D of ₹76,22,179/- was dismissed. The assessee has raised the following grounds of appeal:
“1. The learned Assessing Officer erred in computing the total income at ₹ 2,62,02,440/- as against the
2. The learned Assessing Officer grossly erred in involving the provision of section 14A of the Income Tax Act, 1961 r.w Rule 8D, thereby making disallowance of ₹ 76,22,179/- to the total income of the assessee, without appreciating the fact that the said provisions are not applicable in case of the appellant as it has not erred any exempt income during impugned assessment year.”
The brief facts of the case show that, Assessee Company engaged in the business of running residential hotel and restaurant. It filed it return of income at ₹1,85,81,260/-. As the assessee was having investment in equity shares of associate companies amounting to ₹17,50,57,760/-, on scrutiny the learned Assessing Officer noted that this investment income may result exempt income. However, the learned Assessing Officer also recorded a fact that during the year the company has not earned any exempt income during the year, but this investment are likely to result into exempt income in the hands of the assessee. The learned Assessing Officer following circular No. 5 of 2014 invoking the provision of Rule 8D for disallowance under section 14 of the Act. The assessee submitted that, the assessee is holding strategic investment and has not earned any exempt income. Therefore, disallowance under section 14A cannot be made. The learned Assessing Officer rejected the argument of the assessee. He held
Assessee aggrieved with the assessment order preferred an appeal before the learned CIT-A, who dismissed the appeal and confirmed the disallowance for the reason that amendment by Finance Act, 2022 applies retrospectively.
The assessee is aggrieved with that appellate order and has preferred appeal before us. The learned authorized representative vehemently submitted that during the year assessee has not on earned any exempt income and amendment made by The Finance Act, 2022 will take effect from 01.04.2022 and cannot be presumed to have retrospective effect. For this he relied on the decision of the Hon’ble Delhi High Court in case of PCIT (Central) Vs. Era Infrastructure India Limited [2022] 141 taxmann.com 289 (Delhi).
We have carefully considered the rival contention and pursued the orders of the lower authorities. We find that during the year the assessee has not earned any exempt income. As it is held by Hon’ble Delhi High Court in Era Infrastructure India Limited (Supra) that there cannot be disallowance in the hands of the assessee as the amendment made by the Finance Act, 2022 to section 14A by inserting a non obstante clause and explanation will take effect from 01.04.2022 and cannot be presumed to have retrospective effect. Therefore, in A.Y. 2014-15 no disallowance could be made under section 14A if no exempt income was earned by the assessee.
In view of this, the Ground No. 2 of the appeal is allowed. Assessing Officer is directed to delete the disallowance under section 14A of the Act of ₹76,22,179/-.
In view of this appeal of the assessee is allowed.
Order pronounced in the open court on 15.11.2022.